person using a calculator to work out cost of workers compensation insurance

How Much Does Workers’ Compensation Cost?

Workers’ compensation is a legal requirement here in California. As such, a workers’ compensation policy is a key part of the business protection strategy we provide at the J G Petit Insurance Agency. The cost of a workers’ comp policy is different for every business. The premium is based on payroll and risk of the business being insured.

Workers’ Compensation Premium Calculation

Base Rate * Payroll * Modification = Premium

The premium is calculated by taking the base rate for your industry class code, multiplying that by the total of your payroll and then multiplying that number by your modification. If you have staff performing duties which fall into different classes the calculation will be repeated for each class type.

Base Rate

The Workers’ Compensation Rating Bureau of California (WCIRB) regulate rates for each type of business. The greater the chance of a claim occurring in the occupation, the higher the rate will be. Every type of job is assigned a class code and rating, insurance companies use this rating to set their base rate for each class.


This is the total amount paid of all of the staff in your employment per class of the base rate being calculated, full and part-time employees need to be included.


The WCIRB sets what is referred to in the industry as an X-Mod.  An X-Mod is calculated for companies above a set minimum of payroll and number of years in business.  If a company does not have an X-Mod it will not be a factor in the premium calculation. When a business is formed it will automatically have a modifier of 1. This means that the premium will be comprised of the base rate for the industry and payroll dollars. The X-Mod is simply a factor used to predict the future based on what has happened in the past.  If your business has less claims than the industry average, the modifier will be reduced to less than 1 which means the premium will be discounted from the base premium for safe operation.  If the claims are higher than the industry average the premium will be assigned additional premium based on increased risk.

Protect Your Business

We have program resources set up to help businesses operate safely and therefore have reduced premiums.  If you feel the premium your business pays is too high, call us.  We have strategy to help reduce your premium.

Make sure that your business is operating legally by calling us today on (855) 509-0001 to arrange your Workers’ Compensation policy or Get a Quote now.

headshot of john petit

John Petit

John has a degree in Finance, a Master’s degree in Management, and is licensed to offer insurance products, financial products such as mutual funds and retirement plans.

Published November 13, 2020. Updated October 5, 2023

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